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Fed Adds $72.8B to Markets, Balance Sheet Moves to $4.07T

119 points by jgalt212 7y ago

jgalt212 7y ago
The goals of monetary policy are to promote maximum employment, stable prices and moderate long-term interest rates so long as those goals do not conflict with price supports for assets.
- deleted 7y ago
  [deleted]
- blazespin 7y ago
  I think the fed is mostly concerned about price inflation of a reasonably moral basket of goods. They want it around 2%. It's the "vig" for participating in economic life. Employment and everything else will take care of itself.
  - Danieru 7y ago
    The US Fed has a dual mandate of both full employment and inflation control. Other central banks around the world only have mandates for inflation control, but the US is special in this regard.
    - blazespin 7y ago
      It's just political / PR nonsense. The fed doesn't care about employment (except how it impacts prices). And they shouldn't. If they did, they'd risk hyper inflation and things for everyone would get much much worse. Anyways, the fed can only do so much but try to keep the laws of physics in place. Government spending, Entitlements and taxes are the real levers of economic influence. US government policy has traditionally relied on a combination of entrepreneurs and military might for global economic mastery. Trump is (ironically) undermining military might by destabilizing alliances. Entrepreneurs are doing ok. He is increasing labor participation or at least stopping the decline. This all is making global economy more efficient and meritorious. Trade wars are bad, yes, but China was/is a bad actor and was perverting the US economy by making it lazy. Trump is trying to kick it in the ass and get it going again. I hate Trump, but my feeling is that these fed injections might just be the fact that global efficiencies are pushing rates down below what the fed is comfortable with. We will pay for all of this in other ways no doubt, eg, climate change, weaker social safety nets, nuclear proliferation, etc. Short term, things look good. Longer term there are reasons to freak out. It's not really trumps fault though, people just generally can't reason with the fact that you can make things good and bad at the same time, so arguments and debates are all pretty much irrational. Why not vote in Trump, nobody else is making sense either. Andrew Yang is a perfect example, the only guy who is talking sanity but is at 3% in the polling.
      - QuesnayJr 7y ago
        They really do care about employment. Fed behavior can be approximated by a Taylor rule: https://en.wikipedia.org/wiki/Taylor_rule https://en.wikipedia.org/wiki/Taylor_rule
        craftinator 7y ago
        Cause or effect?
      - fredophile 7y ago
        Was labour participation declining before Trump took office? I thought unemployment rates had been dropping since about the end of the great recession. > Trump is trying to kick it in the ass and get it going again. Get what going again? The economy? When exactly did it stop going?
        blazespin 7y ago
        https://fred.stlouisfed.org/series/CIVPART https://fred.stlouisfed.org/series/CIVPART Most Service jobs are bullshit jobs, IMHO. Trump is trying to bring back manufacturing. Taylor rule is overridden by inflationary factors 'That is, the rule "recommends" a relatively high interest rate (a "tight" monetary policy) when inflation is above its target or when output is above its full-employment level, in order to reduce inflationary pressure. It recommends a relatively low interest rate ("easy" monetary policy) in the opposite situation, to stimulate output. Sometimes monetary policy goals may conflict, as in the case of stagflation, when inflation is above its target while output is below full employment. In such a situation, a Taylor rule specifies the relative weights given to reducing inflation versus increasing output. Anyways, it's not the job of an unelected fed central bank to worry about employment. What does that even mean? Are gig jobs employment? You really need legislators for these types of sticky questions. The fed job is to look at things people have to buy / pay for and try to keep them stable price wise, but not so stable people just stuff their excess money into their mattresses.
      - quintushoratius 7y ago
        > It's not really trumps fault though, people just generally can't reason with the fact that you can make things good and bad at the same time, so arguments and debates are all pretty much irrational. Why not vote in Trump, nobody else is making sense either. Part of being good at your job, as president, is finding ways to meet demands without sacrificing the future. You seem to be suggesting that any president would do the same as Trump in this situation, but I think that's wrong This isn't a binary choice, there is a middle ground where you're not goosing the economy but you're keeping it running, and setting up for a soft landing rather than a crash. This isn't it.
    - dmix 7y ago
      Isn’t there a limit on how low the employment rate should be? Since a small percentage is healthy and normal? I’m curious what full employment means in practice.
      - QuesnayJr 7y ago
        It is thought that the optimal level of unemployment is higher than zero, because people quit jobs to look for new ones, etc. One version of this idea is the NAIRU: https://en.wikipedia.org/wiki/NAIRU https://en.wikipedia.org/wiki/NAIRU It's hard to know what this level is, though.
- raducu 7y ago
  The FED turned into a paper-clip maximizing machine by now. If you only cared about nominal employment you could hand everybody shovels instead of excavators and you can employ 100 guys with shovels instead of a guy with an excavator.
rodgerd 7y ago
"Fed adds half a Bezos to the markets"
stazz1 7y ago
Liquidity! because there's not enough oil to soothe the gears of the economy? Or is the root cause people hoarding money instead of pushing it back into the world?
- DethNinja 7y ago
  Well injecting this money will definitely not help if it is the case of people hoarding money. Also how come they cannot inject this money directly to citizens instead of large companies? Sure, inflation might be larger but what guarantees are there that injecting money to large companies won’t create inflation later down the road.
  - jonahbenton 7y ago
    Citizens are not assets.
    - Red_Leaves_Flyy 7y ago
      Jeff bezos, and countless others before him, have consistently proven this false.
  - aaronblohowiak 7y ago
    Monetary policy is harder to change in the current environment / would have “detrimental” effects for the trade war.
  - Consultant32452 7y ago
    The traditional way to inject money directly to citizens is the government hiring them to do work. Sometimes this is public works, sometimes this is hiring people who join the military. I have no idea what the govt job numbers look like, but I do know we're debt spending at incredible rates.
    - Mikeb85 7y ago
      When interest rates are this low it doesn't make sense to not borrow money...
cheez 7y ago
Since everyone is clearly watching this, the problem will occur elsewhere.
- jotto 7y ago
  With this much printing (without requisite gains in GDP), it means there's already a problem, but we don't understand it yet.
  - cheez 7y ago
    Well the fed is often liquidity of last resort so the question is why they're providing it overnight. The chatter is Deutsche bank is the cause of it which would seem to imply that the problem is contained. Basically banks don't trust each other right now which is what happened before the last tanking but it also happens frequently without tanking. So I don't know what this really signals.
- anm89 7y ago
  This IS the problem.
  - postingTwoFast 7y ago
    This is PART of the problem.
s1k3b8 7y ago
In other words, expect destabilization in many parts of the world. Isn't the conventional wisdom that when money leaves the system at such a quick and disorderly pace that the Fed needs to step in, that the money is being taken out to fund black ops, pay for protests, buy political/military leaders and overthrow or put pressure on regimes. At least this time, they are doing it quietly on the backend rather than the frontend like the stock market which could cause side-effects like stock market collapse and expose weak sectors ( a la 2008 financial crisis ).
- carlsborg 7y ago
  No. The world is close to being in a recession. Germany just avoided it by posting 0.1 percent quarterly growth. Asset valuations would crater without these monetary injections, pulling the global economy further down in a viscous cycle. Not something you would want at this point of time if you were at the decision making table.
  - raducu 7y ago
    This reminds me about disciplining your children -- if you allow for such arguments "now is not the right time" -- you will end up with spoiled children, because it is never the right time, discipline, be it financial discipline should be a constant first principle or there is no discipline whatsoever. We did not discipline the people creating the 2008 subprime crisis because it was not the right time to do it, and now they are running the show and fucking up the whole world economy.
y4eyeyw4yw 7y ago
"Isn't the conventional wisdom that when money leaves the system at such a quick and disorderly pace that the Fed needs to step in, that the money is being taken out to fund black ops, pay for protests, buy political/military leaders and overthrow or put pressure on regimes." no, you're just a moron that can't think critically and rely on other morons on the internet to fill your head with shit.
lvs 7y ago
I can't get through the paywall, but I'm not sure what the news is. The fed has been running this repo operation every day. On Thursday it was $78.7b, and on Wednesday it was $70.1b. This liquidity injection has been ongoing for a few months. https://apps.newyorkfed.org/markets/autorates/tomo-results-display?SHOWMORE=TRUE&startDate=01/01/2000&enddate=01/01/2000 https://apps.newyorkfed.org/markets/autorates/tomo-results-d... They are doing overnights to $120b daily. https://www.newyorkfed.org/markets/domestic-market-operations/monetary-policy-implementation/repo-reverse-repo-agreements/repurchase-agreement-operational-details https://www.newyorkfed.org/markets/domestic-market-operation...
- everybodyknows 7y ago
  FT describes an apparently escalating game of overnight "repo" borrowing, in order to meet regulatory limits, with the days at end of quarter apparently special: https://www.ft.com/content/1374afd4-181d-11ea-9ee4-11f260415385 https://www.ft.com/content/1374afd4-181d-11ea-9ee4-11f260415... This suggests a systemic instability.
  - raviolo 7y ago
    Yeah but those with the term of one day is just replacing maturing repos - not adding new ones.
  - lvs 7y ago
    There's definitely an imbalance at play here. But the Fed's actions have not been shifting dramatically. I don't know what the FT piece is referring to when they say they increased the size of Monday's operation. That is not reflected on the Fed's schedule of operations. The term offering Monday is distinct in the term length (~1 month), not its size. That means the value will be held on the Fed's books for longer than the 2-week term and overnight term operations that they've been running continuously. https://www.newyorkfed.org/markets/domestic-market-operations/monetary-policy-implementation/repo-reverse-repo-agreements/repurchase-agreement-operational-details#operation-schedule-parameters https://www.newyorkfed.org/markets/domestic-market-operation... I expect this longer term offer is because there is the expectation of year-end stress in outlays and could destabilize the market toward year-end. This term offering runs through the first week of Jan, so they're hoping to smooth over the possibility of year-end illiquidity.
thatiscool 7y ago
some people are desparately preventing the stock market from crash.
- cm2187 7y ago
  Agree, this is now much more than a small dent in the Fed balance sheet, it is a new period of QE: https://www.federalreserve.gov/monetarypolicy/bst_recenttrends.htm https://www.federalreserve.gov/monetarypolicy/bst_recenttren... I am bearish but I can't say I am excited to bet against the Fed!
  - 0x8BADF00D 7y ago
    You don't need to bet against the Fed, you just need to bet against the dollar price index going up.
    - echelon 7y ago
      If the dollar and the stock market are "going to crash", where should one put their money?
      - raducu 7y ago
        Nobody really knows, or they would be rich. Warren Buffet seems to hold cash in expectation for the next crash, but the last crash proved he can get access to much better deals than you and I can, so it doesn't mean you should hold cash because he does. Real estate seems overpriced, but who really knows? Gold? Bitcoin? Yeah right. Perhaps index funds? It would seem unwise now that stock markets are at all times high, but perhaps "time in the market is better than timing the market".
      - deleted 7y ago
        [deleted]
      - wasdfff 7y ago
        In the market. Let it crash. In 5 years you will be back to where you were or in the green.
Bootvis 7y ago
This podcast is very informative on this topic: https://www.bloomberg.com/news/articles/2019-11-11/this-is-why-the-repo-markets-went-crazy-and-why-december-could-be-even-worse https://www.bloomberg.com/news/articles/2019-11-11/this-is-w...
- useful 7y ago
  Here is another link to the podcast https://podcasts.google.com/?feed=aHR0cDovL2ZlZWRzLmJsb29tYmVyZy5mbS9CTE0yMDA5ODM3NDc3&episode=YWM1OGQyNjgtMDI1NC0xMWVhLWE1ZjgtN2I4YTQ0OThmY2I5&hl=en&ved=2ahUKEwi8jPHZy6XmAhVjGDQIHTzvCrMQieUEegQIBhAK&ep=6&at=1575792300475 https://podcasts.google.com/?feed=aHR0cDovL2ZlZWRzLmJsb29tYm...
jMyles 7y ago
I'm already fairly stalwart in the position that Fed-style reserve banking is not part of a compelling future for humanity as economies evolve into the information age, but this kind of side-handed QE makes it easier and easier to feel comfortable in that position.
- benaadams 7y ago
  https://www.nybooks.com/articles/2019/12/05/against-economics/ https://www.nybooks.com/articles/2019/12/05/against-economic...
HSO 7y ago
There is a general dollar shortage in the world, explaining things as superficially diverse as this, increasing Saudi desperation (as evidenced by the machinations behind their pseudo-IPO), CCP forbearance on HK (relatively speaking), and the covered interest parity puzzle. I don't want to explain more but some might want to look into it.
- pinkfoot 7y ago
  No, there is a shortage of demand from the ebtire planet to hold or denominate their trade in anything other than reserve currencies. When that is 7,5 billion people (including moi), then there is a permanent shortage. Feel free to diversify your pension in any African or South American currency
- raducu 7y ago
  There is no dollar shortage, there is a shortage of suckers wanting to hold their dollars in regular bank accounts due to low interest rates. As long as the the FED is willing to provide liquidity no questions asked, why would you hold dollars? Just buy high yield bonds and when you want liquidity, you call the FED and loan your junk bonds for real dollars and you pocket the interest rate difference.
  - Ambele 7y ago
    I'd really rather use my 2% savings account than the 1.61% from short term treasuries, 1.65% from intermediate term treasuries, or 2.1% from long term treasuries.* Or maybe you're making snarky comment on how large banks were bailed out in 2008 by the Fed by which the Fed traded a portion of it's "good" treasury debt for bad bank debt (CDOs). If that's the case than I agree because I dislike how the Fed bails out the banksters more than the common man. *Source for annual interest rates on common bonds: https://investor.vanguard.com/etf/list#/etf/asset-class/month-end-returns https://investor.vanguard.com/etf/list#/etf/asset-class/mont...
- Ambele 7y ago
  I agree. I still scratch my head why China still accepts US Dollars and why we don't need to carry around Chinese Yuans yet.
sgt101 7y ago
QE is proving to be a very inefficient way to inflate the economy. The idea was that the banks would take the capital and lend it to corporations for productive investment, but I see no sign of this - the money is being laundered through dividends and financial engineering to the 0.1% If I were the next president I would establish a national investment bank and use it to undertake infrastructure improvement / development by US companies in both the US and abroad (because stimulating the economy else where would be pretty useful to the US as well). I would mandate that the fed would have to invest in the national bank first and the national bank would be allowed to bail out other banks (with "liquidity") only if it received substantial near term reward from the investment (therefore definitely only liquidity). The problem with this operation by the fed is that every banks finance department has priced it in for this quarter, so they're all going with the begging bowl now - moral hazard write large!
- darawk 7y ago
  > QE is proving to be a very inefficient way to inflate the economy. The idea was that the banks would take the capital and lend it to corporations for productive investment, but I see no sign of this - the money is being laundered through dividends and financial engineering to the 0.1% Even if we accept your premise that that is what is happening, what is it that you think the 0.1% are doing with that money? They're doing one of two things: 1. Reinvesting it in other companies, who are then using that capital to invest in their business. 2. Buying goods and services from companies who use that revenue to invest in their business. > If I were the next president I would establish a national investment bank and use it to undertake infrastructure improvement / development by US companies in both the US and abroad (because stimulating the economy else where would be pretty useful to the US as well). Why do we need to establish a national investment bank to undertake infrastructure projects? The federal government undertakes infrastructure projects all the time. > I would mandate that the fed would have to invest in the national bank first and the national bank would be allowed to bail out other banks (with "liquidity") only if it received substantial near term reward from the investment (therefore definitely only liquidity). Are you aware that the US government made a very healthy profit by bailing out the banks in 2008[1]? > The problem with this operation by the fed is that every banks finance department has priced it in for this quarter, so they're all going with the begging bowl now - moral hazard write large! That's...actually exactly the point of it. There is no 'moral hazard' here. The fed wants the market to anticipate its actions, and react to them pre-emptively. This allows the fed to actually do less than they otherwise might have to. If the Fed's goal is to drive rates down to a certain point, and the market knows they'll spend the money to do it, the market will do it for them. That's how arbitrage works. This is the system working exactly as intended. 1. https://www.washingtonpost.com/business/economy/bailout-highly-profitable-for-taxpayers-when-you-look-at-the-right-numbers/2015/01/01/dc2a05a6-8fa5-11e4-a412-4b735edc7175_story.html https://www.washingtonpost.com/business/economy/bailout-high...
sub7 7y ago
This debt will all be paid by the US dollar falling dramatically. Many assets will keep their inflated prices in nominal terms though still good buys out there.
hamhand 7y ago
The geography of dollar funding of non-US banks https://www.bis.org/publ/qtrpdf/r_qt1812b.htm https://www.bis.org/publ/qtrpdf/r_qt1812b.htm
chris123 7y ago
The Fed and bank bailouts are transferring wealth to the wealthy from everyone else. Fiat makes it all possible. It's not hard money. We must get back in a hard money system. Read or listen to "The Bitcoin Standard." Can also find author and podcasts on YouTube.
- whoisninja 7y ago
  totally, highly recommend listening to this podcast everyone. The guest explains the repo situation very well in addition to Bitcoin as hard money: https://www.whatbitcoindid.com/podcast/nik-bhatia-on-bitcoin-is-a-response-to-central-banks https://www.whatbitcoindid.com/podcast/nik-bhatia-on-bitcoin...
- smaddox 7y ago
  Deflationary currency is even worse than Fiat currency. We don't need irrecoverable recessions. We just need our governments to stop relying on trickle-down nonsense, and start injecting money at the bottom. We need to rely on and leverage the trickle-up economy that we've always had.
  - jjeaff 7y ago
    I don't think trickle down economics are what was being used for these bailouts. The rationale behind the bailouts was that the failure of many of these large banks would have caused lots of trouble and additional damage to the system as a whole. Markets are controlled by consumer sentiment. The failure of any huge banks or other huge organizations like AIG would have caused a catastrophic run on the banks and even farther fall in the market. Additionally, I believe overall the US government has netted more than $100B in bailouts. The bailouts were most definitely a good idea according to essentially every expert out there. But if anything, they should have extracted more from the companies they bailed out to limit the moral hazard that was created.
    - smaddox 7y ago
      The bank bailouts is distinct from Quantitative Easing. The former was government backed loans to large banks. The latter is the Federal Reserve buying extremely over-valued financial assets (over-valued because of fraud), and then just financial assets in general, in order to prop up the price of these assets. The former was probably a necessary evil, but it should have come with more changes. The latter is less clear. Because of the massive amounts of fraud that occured, many citizens pension funds were extremely exposed to junk financial assets. So the Fed decided they couldn't let the market correct itself. But a better solution would have been a market correction combined with a direct stimulus to the lower and middle class.

119 points by jgalt212 7y ago

The goals of monetary policy are to promote maximum employment, stable prices and moderate long-term interest rates so long as those goals do not conflict with price supports for assets.

deleted 7y ago
[deleted]
blazespin 7y ago
I think the fed is mostly concerned about price inflation of a reasonably moral basket of goods. They want it around 2%. It's the "vig" for participating in economic life. Employment and everything else will take care of itself.
- Danieru 7y ago
  The US Fed has a dual mandate of both full employment and inflation control. Other central banks around the world only have mandates for inflation control, but the US is special in this regard.
  - blazespin 7y ago
    It's just political / PR nonsense. The fed doesn't care about employment (except how it impacts prices). And they shouldn't. If they did, they'd risk hyper inflation and things for everyone would get much much worse. Anyways, the fed can only do so much but try to keep the laws of physics in place. Government spending, Entitlements and taxes are the real levers of economic influence. US government policy has traditionally relied on a combination of entrepreneurs and military might for global economic mastery. Trump is (ironically) undermining military might by destabilizing alliances. Entrepreneurs are doing ok. He is increasing labor participation or at least stopping the decline. This all is making global economy more efficient and meritorious. Trade wars are bad, yes, but China was/is a bad actor and was perverting the US economy by making it lazy. Trump is trying to kick it in the ass and get it going again. I hate Trump, but my feeling is that these fed injections might just be the fact that global efficiencies are pushing rates down below what the fed is comfortable with. We will pay for all of this in other ways no doubt, eg, climate change, weaker social safety nets, nuclear proliferation, etc. Short term, things look good. Longer term there are reasons to freak out. It's not really trumps fault though, people just generally can't reason with the fact that you can make things good and bad at the same time, so arguments and debates are all pretty much irrational. Why not vote in Trump, nobody else is making sense either. Andrew Yang is a perfect example, the only guy who is talking sanity but is at 3% in the polling.
    - QuesnayJr 7y ago
      They really do care about employment. Fed behavior can be approximated by a Taylor rule: https://en.wikipedia.org/wiki/Taylor_rule https://en.wikipedia.org/wiki/Taylor_rule
      - craftinator 7y ago
        Cause or effect?
    - fredophile 7y ago
      Was labour participation declining before Trump took office? I thought unemployment rates had been dropping since about the end of the great recession. > Trump is trying to kick it in the ass and get it going again. Get what going again? The economy? When exactly did it stop going?
      - blazespin 7y ago
        https://fred.stlouisfed.org/series/CIVPART https://fred.stlouisfed.org/series/CIVPART Most Service jobs are bullshit jobs, IMHO. Trump is trying to bring back manufacturing. Taylor rule is overridden by inflationary factors 'That is, the rule "recommends" a relatively high interest rate (a "tight" monetary policy) when inflation is above its target or when output is above its full-employment level, in order to reduce inflationary pressure. It recommends a relatively low interest rate ("easy" monetary policy) in the opposite situation, to stimulate output. Sometimes monetary policy goals may conflict, as in the case of stagflation, when inflation is above its target while output is below full employment. In such a situation, a Taylor rule specifies the relative weights given to reducing inflation versus increasing output. Anyways, it's not the job of an unelected fed central bank to worry about employment. What does that even mean? Are gig jobs employment? You really need legislators for these types of sticky questions. The fed job is to look at things people have to buy / pay for and try to keep them stable price wise, but not so stable people just stuff their excess money into their mattresses.
    - quintushoratius 7y ago
      > It's not really trumps fault though, people just generally can't reason with the fact that you can make things good and bad at the same time, so arguments and debates are all pretty much irrational. Why not vote in Trump, nobody else is making sense either. Part of being good at your job, as president, is finding ways to meet demands without sacrificing the future. You seem to be suggesting that any president would do the same as Trump in this situation, but I think that's wrong This isn't a binary choice, there is a middle ground where you're not goosing the economy but you're keeping it running, and setting up for a soft landing rather than a crash. This isn't it.
  - dmix 7y ago
    Isn’t there a limit on how low the employment rate should be? Since a small percentage is healthy and normal? I’m curious what full employment means in practice.
    - QuesnayJr 7y ago
      It is thought that the optimal level of unemployment is higher than zero, because people quit jobs to look for new ones, etc. One version of this idea is the NAIRU: https://en.wikipedia.org/wiki/NAIRU https://en.wikipedia.org/wiki/NAIRU It's hard to know what this level is, though.
raducu 7y ago
The FED turned into a paper-clip maximizing machine by now. If you only cared about nominal employment you could hand everybody shovels instead of excavators and you can employ 100 guys with shovels instead of a guy with an excavator.

rodgerd 7y ago

"Fed adds half a Bezos to the markets"

stazz1 7y ago

Liquidity! because there's not enough oil to soothe the gears of the economy? Or is the root cause people hoarding money instead of pushing it back into the world?

DethNinja 7y ago
Well injecting this money will definitely not help if it is the case of people hoarding money. Also how come they cannot inject this money directly to citizens instead of large companies? Sure, inflation might be larger but what guarantees are there that injecting money to large companies won’t create inflation later down the road.
- jonahbenton 7y ago
  Citizens are not assets.
  - Red_Leaves_Flyy 7y ago
    Jeff bezos, and countless others before him, have consistently proven this false.
- aaronblohowiak 7y ago
  Monetary policy is harder to change in the current environment / would have “detrimental” effects for the trade war.
- Consultant32452 7y ago
  The traditional way to inject money directly to citizens is the government hiring them to do work. Sometimes this is public works, sometimes this is hiring people who join the military. I have no idea what the govt job numbers look like, but I do know we're debt spending at incredible rates.
  - Mikeb85 7y ago
    When interest rates are this low it doesn't make sense to not borrow money...

cheez 7y ago

Since everyone is clearly watching this, the problem will occur elsewhere.

jotto 7y ago
With this much printing (without requisite gains in GDP), it means there's already a problem, but we don't understand it yet.
- cheez 7y ago
  Well the fed is often liquidity of last resort so the question is why they're providing it overnight. The chatter is Deutsche bank is the cause of it which would seem to imply that the problem is contained. Basically banks don't trust each other right now which is what happened before the last tanking but it also happens frequently without tanking. So I don't know what this really signals.
anm89 7y ago
This IS the problem.
- postingTwoFast 7y ago
  This is PART of the problem.

s1k3b8 7y ago

In other words, expect destabilization in many parts of the world. Isn't the conventional wisdom that when money leaves the system at such a quick and disorderly pace that the Fed needs to step in, that the money is being taken out to fund black ops, pay for protests, buy political/military leaders and overthrow or put pressure on regimes. At least this time, they are doing it quietly on the backend rather than the frontend like the stock market which could cause side-effects like stock market collapse and expose weak sectors ( a la 2008 financial crisis ).

carlsborg 7y ago
No. The world is close to being in a recession. Germany just avoided it by posting 0.1 percent quarterly growth. Asset valuations would crater without these monetary injections, pulling the global economy further down in a viscous cycle. Not something you would want at this point of time if you were at the decision making table.
- raducu 7y ago
  This reminds me about disciplining your children -- if you allow for such arguments "now is not the right time" -- you will end up with spoiled children, because it is never the right time, discipline, be it financial discipline should be a constant first principle or there is no discipline whatsoever. We did not discipline the people creating the 2008 subprime crisis because it was not the right time to do it, and now they are running the show and fucking up the whole world economy.

y4eyeyw4yw 7y ago

"Isn't the conventional wisdom that when money leaves the system at such a quick and disorderly pace that the Fed needs to step in, that the money is being taken out to fund black ops, pay for protests, buy political/military leaders and overthrow or put pressure on regimes." no, you're just a moron that can't think critically and rely on other morons on the internet to fill your head with shit.

lvs 7y ago

I can't get through the paywall, but I'm not sure what the news is. The fed has been running this repo operation every day. On Thursday it was $78.7b, and on Wednesday it was $70.1b. This liquidity injection has been ongoing for a few months. https://apps.newyorkfed.org/markets/autorates/tomo-results-display?SHOWMORE=TRUE&startDate=01/01/2000&enddate=01/01/2000 https://apps.newyorkfed.org/markets/autorates/tomo-results-d... They are doing overnights to $120b daily. https://www.newyorkfed.org/markets/domestic-market-operations/monetary-policy-implementation/repo-reverse-repo-agreements/repurchase-agreement-operational-details https://www.newyorkfed.org/markets/domestic-market-operation...

everybodyknows 7y ago
FT describes an apparently escalating game of overnight "repo" borrowing, in order to meet regulatory limits, with the days at end of quarter apparently special: https://www.ft.com/content/1374afd4-181d-11ea-9ee4-11f260415385 https://www.ft.com/content/1374afd4-181d-11ea-9ee4-11f260415... This suggests a systemic instability.
- raviolo 7y ago
  Yeah but those with the term of one day is just replacing maturing repos - not adding new ones.
- lvs 7y ago
  There's definitely an imbalance at play here. But the Fed's actions have not been shifting dramatically. I don't know what the FT piece is referring to when they say they increased the size of Monday's operation. That is not reflected on the Fed's schedule of operations. The term offering Monday is distinct in the term length (~1 month), not its size. That means the value will be held on the Fed's books for longer than the 2-week term and overnight term operations that they've been running continuously. https://www.newyorkfed.org/markets/domestic-market-operations/monetary-policy-implementation/repo-reverse-repo-agreements/repurchase-agreement-operational-details#operation-schedule-parameters https://www.newyorkfed.org/markets/domestic-market-operation... I expect this longer term offer is because there is the expectation of year-end stress in outlays and could destabilize the market toward year-end. This term offering runs through the first week of Jan, so they're hoping to smooth over the possibility of year-end illiquidity.

thatiscool 7y ago

some people are desparately preventing the stock market from crash.

cm2187 7y ago
Agree, this is now much more than a small dent in the Fed balance sheet, it is a new period of QE: https://www.federalreserve.gov/monetarypolicy/bst_recenttrends.htm https://www.federalreserve.gov/monetarypolicy/bst_recenttren... I am bearish but I can't say I am excited to bet against the Fed!
- 0x8BADF00D 7y ago
  You don't need to bet against the Fed, you just need to bet against the dollar price index going up.
  - echelon 7y ago
    If the dollar and the stock market are "going to crash", where should one put their money?
    - raducu 7y ago
      Nobody really knows, or they would be rich. Warren Buffet seems to hold cash in expectation for the next crash, but the last crash proved he can get access to much better deals than you and I can, so it doesn't mean you should hold cash because he does. Real estate seems overpriced, but who really knows? Gold? Bitcoin? Yeah right. Perhaps index funds? It would seem unwise now that stock markets are at all times high, but perhaps "time in the market is better than timing the market".
    - deleted 7y ago
      [deleted]
    - wasdfff 7y ago
      In the market. Let it crash. In 5 years you will be back to where you were or in the green.

Bootvis 7y ago

This podcast is very informative on this topic: https://www.bloomberg.com/news/articles/2019-11-11/this-is-why-the-repo-markets-went-crazy-and-why-december-could-be-even-worse https://www.bloomberg.com/news/articles/2019-11-11/this-is-w...

useful 7y ago
Here is another link to the podcast https://podcasts.google.com/?feed=aHR0cDovL2ZlZWRzLmJsb29tYmVyZy5mbS9CTE0yMDA5ODM3NDc3&episode=YWM1OGQyNjgtMDI1NC0xMWVhLWE1ZjgtN2I4YTQ0OThmY2I5&hl=en&ved=2ahUKEwi8jPHZy6XmAhVjGDQIHTzvCrMQieUEegQIBhAK&ep=6&at=1575792300475 https://podcasts.google.com/?feed=aHR0cDovL2ZlZWRzLmJsb29tYm...

jMyles 7y ago

I'm already fairly stalwart in the position that Fed-style reserve banking is not part of a compelling future for humanity as economies evolve into the information age, but this kind of side-handed QE makes it easier and easier to feel comfortable in that position.

benaadams 7y ago
https://www.nybooks.com/articles/2019/12/05/against-economics/ https://www.nybooks.com/articles/2019/12/05/against-economic...

HSO 7y ago

There is a general dollar shortage in the world, explaining things as superficially diverse as this, increasing Saudi desperation (as evidenced by the machinations behind their pseudo-IPO), CCP forbearance on HK (relatively speaking), and the covered interest parity puzzle. I don't want to explain more but some might want to look into it.

pinkfoot 7y ago
No, there is a shortage of demand from the ebtire planet to hold or denominate their trade in anything other than reserve currencies. When that is 7,5 billion people (including moi), then there is a permanent shortage. Feel free to diversify your pension in any African or South American currency
raducu 7y ago
There is no dollar shortage, there is a shortage of suckers wanting to hold their dollars in regular bank accounts due to low interest rates. As long as the the FED is willing to provide liquidity no questions asked, why would you hold dollars? Just buy high yield bonds and when you want liquidity, you call the FED and loan your junk bonds for real dollars and you pocket the interest rate difference.
- Ambele 7y ago
  I'd really rather use my 2% savings account than the 1.61% from short term treasuries, 1.65% from intermediate term treasuries, or 2.1% from long term treasuries.* Or maybe you're making snarky comment on how large banks were bailed out in 2008 by the Fed by which the Fed traded a portion of it's "good" treasury debt for bad bank debt (CDOs). If that's the case than I agree because I dislike how the Fed bails out the banksters more than the common man. *Source for annual interest rates on common bonds: https://investor.vanguard.com/etf/list#/etf/asset-class/month-end-returns https://investor.vanguard.com/etf/list#/etf/asset-class/mont...
Ambele 7y ago
I agree. I still scratch my head why China still accepts US Dollars and why we don't need to carry around Chinese Yuans yet.

sgt101 7y ago

QE is proving to be a very inefficient way to inflate the economy. The idea was that the banks would take the capital and lend it to corporations for productive investment, but I see no sign of this - the money is being laundered through dividends and financial engineering to the 0.1% If I were the next president I would establish a national investment bank and use it to undertake infrastructure improvement / development by US companies in both the US and abroad (because stimulating the economy else where would be pretty useful to the US as well). I would mandate that the fed would have to invest in the national bank first and the national bank would be allowed to bail out other banks (with "liquidity") only if it received substantial near term reward from the investment (therefore definitely only liquidity). The problem with this operation by the fed is that every banks finance department has priced it in for this quarter, so they're all going with the begging bowl now - moral hazard write large!

darawk 7y ago
> QE is proving to be a very inefficient way to inflate the economy. The idea was that the banks would take the capital and lend it to corporations for productive investment, but I see no sign of this - the money is being laundered through dividends and financial engineering to the 0.1% Even if we accept your premise that that is what is happening, what is it that you think the 0.1% are doing with that money? They're doing one of two things: 1. Reinvesting it in other companies, who are then using that capital to invest in their business. 2. Buying goods and services from companies who use that revenue to invest in their business. > If I were the next president I would establish a national investment bank and use it to undertake infrastructure improvement / development by US companies in both the US and abroad (because stimulating the economy else where would be pretty useful to the US as well). Why do we need to establish a national investment bank to undertake infrastructure projects? The federal government undertakes infrastructure projects all the time. > I would mandate that the fed would have to invest in the national bank first and the national bank would be allowed to bail out other banks (with "liquidity") only if it received substantial near term reward from the investment (therefore definitely only liquidity). Are you aware that the US government made a very healthy profit by bailing out the banks in 2008[1]? > The problem with this operation by the fed is that every banks finance department has priced it in for this quarter, so they're all going with the begging bowl now - moral hazard write large! That's...actually exactly the point of it. There is no 'moral hazard' here. The fed wants the market to anticipate its actions, and react to them pre-emptively. This allows the fed to actually do less than they otherwise might have to. If the Fed's goal is to drive rates down to a certain point, and the market knows they'll spend the money to do it, the market will do it for them. That's how arbitrage works. This is the system working exactly as intended. 1. https://www.washingtonpost.com/business/economy/bailout-highly-profitable-for-taxpayers-when-you-look-at-the-right-numbers/2015/01/01/dc2a05a6-8fa5-11e4-a412-4b735edc7175_story.html https://www.washingtonpost.com/business/economy/bailout-high...

sub7 7y ago

This debt will all be paid by the US dollar falling dramatically. Many assets will keep their inflated prices in nominal terms though still good buys out there.

hamhand 7y ago

The geography of dollar funding of non-US banks https://www.bis.org/publ/qtrpdf/r_qt1812b.htm https://www.bis.org/publ/qtrpdf/r_qt1812b.htm

chris123 7y ago

The Fed and bank bailouts are transferring wealth to the wealthy from everyone else. Fiat makes it all possible. It's not hard money. We must get back in a hard money system. Read or listen to "The Bitcoin Standard." Can also find author and podcasts on YouTube.

whoisninja 7y ago
totally, highly recommend listening to this podcast everyone. The guest explains the repo situation very well in addition to Bitcoin as hard money: https://www.whatbitcoindid.com/podcast/nik-bhatia-on-bitcoin-is-a-response-to-central-banks https://www.whatbitcoindid.com/podcast/nik-bhatia-on-bitcoin...
smaddox 7y ago
Deflationary currency is even worse than Fiat currency. We don't need irrecoverable recessions. We just need our governments to stop relying on trickle-down nonsense, and start injecting money at the bottom. We need to rely on and leverage the trickle-up economy that we've always had.
- jjeaff 7y ago
  I don't think trickle down economics are what was being used for these bailouts. The rationale behind the bailouts was that the failure of many of these large banks would have caused lots of trouble and additional damage to the system as a whole. Markets are controlled by consumer sentiment. The failure of any huge banks or other huge organizations like AIG would have caused a catastrophic run on the banks and even farther fall in the market. Additionally, I believe overall the US government has netted more than $100B in bailouts. The bailouts were most definitely a good idea according to essentially every expert out there. But if anything, they should have extracted more from the companies they bailed out to limit the moral hazard that was created.
  - smaddox 7y ago
    The bank bailouts is distinct from Quantitative Easing. The former was government backed loans to large banks. The latter is the Federal Reserve buying extremely over-valued financial assets (over-valued because of fraud), and then just financial assets in general, in order to prop up the price of these assets. The former was probably a necessary evil, but it should have come with more changes. The latter is less clear. Because of the massive amounts of fraud that occured, many citizens pension funds were extremely exposed to junk financial assets. So the Fed decided they couldn't let the market correct itself. But a better solution would have been a market correction combined with a direct stimulus to the lower and middle class.